Well whatever happens to him, I hope he gets to some anger management classes.

 

Another question. Did he have a family and if so where are they living now? That was a big house for just one guy. If my husband bulldozed my house because he defalted on his business loans, he would have bigger problems than the bank, IRS, or law enforcement.:madman::taz:

Sure he knew he was mortgaging his home, for the purchase of said home. The cross-collateralization clause are included in the language of some banks and almost all credit unions notes/mortgages/security agreements. My understanding of this instance was that he had the mortgage (home/personal) loan prior to financing his business through the same bank. It is also my understanding that when the bank financed the commercial loan they did not use as collateral his personal residence, but because he had a previous mortgage loan with this clause in it and he personally guaranteed the commercial loan his residence was caught in the clause. Not saying he was right in his actions just trying to explain why he may be angry and not understand. Honestly how many people actually sit and read all the documents at a loan closing, I know I didn't? The only closing document that has to be made available prior to closing a consumer mortgage loanis the HUD statement not the docs with the contractual information.

 

That's a possibility and if so I can somewhat understand your point.

 

In reading the linked article, it's impossible for me to conclude if the home loan came first or not. Regardless, I remain firm in my stance that he should have thoroughly reviewed and understood each provision in his home loan docs before he executed them. Which may be the best learning point for all readers of this thread: insist on getting the loan docs in advance of the closing and make sure they are reviewed by legal counsel. In my opinion, a qualified attorney would have pointed out to the borrower that the home loan mortgage secured not only the home loan, but all other debt of the borrower to the lender (including, but not limited to, a subsequent guarantee of the business loan-if that's the order things transpired). The bank may have been willing to delete the cross collateralization clause if the borrower insisted and threatened to take the home loan request to another bank. If not, the issue would have at least been "burned" into the guy's memory.

 

Cross collateralization clauses are pretty much boiler plate in all loan docs. Is it unfair that they are in there? That's simply a matter of whose ox is being gored. They do serve to protect the bank and increase the chances that the bank is repaid all sums due from the borrower, whether as an obligor or as a guarantor. My guess and it's just a guess based on my years of representing the bank, is that if your understanding is correct (home loan and mortgage first, then the business loan covered by the owner's guarantee which was secured by the previously granted mortgage) then the bank either wouldn't have made the business loan if the home loan mortgage hadn't secured it or if they would have made the loan any way, it would have been at a higher interest rate or the bank demanded other collateral. As you know, the interest rate on business loans is driven by the risk of non-repayment. The lesser amount of collateral pledged means the greater the chance the bank is undersecured (the infamous "air ball") which drives the interest rate up. So assuming normal bank underwriting procedures, the guy probably got the benefit of his home loan mortgage securing the business loan when he got the business loan.

 

Apology accepted. My response to your comment shouldn't have been as smart either. I'm rather sensitive to people these days continually making banks look to be the villian. What the big Wall Street bankers did was wrong; but it seems like a lot of folks (not necessarily you) are using a very broad brush to villify every bank, which is unfair.

Good stuff LN! The more I read about this story the more I think the guy is an ignoramous. To draw the attention to himself is just stupid. He isn't the only small business owner to experience tough times.

Good stuff LN! The more I read about this story the more I think the guy is an ignoramous. To draw the attention to himself is just stupid. He isn't the only small business owner to experience tough times.

:thumb:

If the bank doesn't get the loan repaid, as a result of the man destroying the bank's collateral, how are you so sure it made its money off the man?

 

I am sure the bank will come out okay in the long run of this stuff.

http://www.wlwt.com/news/22662084/detail.html

 

A little more to the story. Apparently it is legal for him to tear it down but he still has to make payments on the mortgage. Now he wants to buy the land and rebuild. Sounds like mental problems to me.

I heard parts of his interview on WLW w/ Cunningham. He was saying it was an IRS issue more than anything. I'm going to try to listen to the whole pod cast tomorrow. I think he had a point, but I missed the beginning of the story.